Stock management Models/ROC and ROL Flashcards

1
Q

What is the reorder interval?

A

Th regular time period at which inventory is reviewed to determine

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2
Q

There are two different types of stock management systems, which are those?

A
  1. Continuous review systems: continuous check of inventory after each withdrawal
  • more expensive, but good to always know inventory status
  1. Periodic review system: periodic check at fixed time period
  • cheaper, but bigger risks of stockout since the inventory level isn’t controlled as regularly
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3
Q

What is the reorder interval T?

A

For periodic review systems: regular time period at which inventory is reviewed to determine whether new stock should be ordered.

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4
Q

What is reorder level?

A

When stock falls below a certain reorder level (ROP) a new order is issued

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5
Q

How can risk of stockout be avoided?

A

Use of safety stock and continuous checks of inventory

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6
Q

It can be difficult to determine the stockout cost? How can that be done?

A

Use probabilistic model and assume that demand is normally distributed

With the help of mean and standard deviation and determine the ROP and the safety stock

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7
Q

What is Single Period inventory model? What are the challenges?

A

Items that cannot be held over and used as inventory in the next salesperiod

Ex. Bakery goods, newspapers, Christmas trees

Challenge: Critical decision is how much to order at the beginning of the period: 50% risk of stockout and 50% risk of leftover

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8
Q

What are ROL methods? What items are suitable for these types of methods?

A

Reorder Level methods. Continuous inventory review system controlled by inventory level.
- A new order is carried out when ROP is reached
- Suitable for A category items, dvs important products for the company

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9
Q

What are ROC methods? What items are suitable for these types of methods?

A

Reorder Cycle methods. Stock revision is periodic and performed after fixed time periods.

  • Suitable for orders with limited holding costs and high uncertainty: ex. full load shipments that are placed at fixed time intervals
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10
Q

There are different types of ROC systems, can you tell me about those? Also write down the corresponding formulas on paper

A
  1. ROP-approach:
    - Fixed Q, fixed time period R: if under the ROP at inventory check at the end of time period, a new order with set quantity is issued
  2. Max-approach
    - Fixed time period R: When the control is performed, enough items are ordered to raise the quantity to the maximum inventory level
  3. Min-max approach
    - When the controls performed and the stock us under ROP, a new order is issued that raises the stock to its maximum level
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11
Q

There are different types of ROC systems, can you tell me about those? Also write down the corresponding formulas on paper

A
  1. 2 bin-system/ROP system: When inventory goes below ROP, a new order of a fixed quantity is triggered
    - quite simple, and easy for supplier to predict demand
  2. Min-max approach: When inventory goes below ROP, an order is issued that raises the inventory its maximum level
    - simple, but suppliers risks making error due to unpredictable demand
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